Why This Country Plans to Stabilize Their Economy Through Digital Gold
Why is gold so significant in restoring trust and stability in a currency? In this video, Lynette Zang delves into the ongoing issues surrounding Zimbabwe’s currency. She also explains the controversial measures taken by the government to obtain the necessary gold reserves and the potential consequences for miners. We hope this presentation can help you get a deeper understanding of the role that gold plays in monetary systems and the potential impact on everyday citizens.
CHAPTERS:
0:00 Zimbabwe
3:00 Digital Gold Backed Currency
8:52 IMF Warns Zimbabwe
15:29 Bill HB4903
17:22 Gold Safe Haven Asset
SLIDES FROM VIDEO:
TRANSCRIPT FROM VIDEO:
I’ve been following the issues around Zimbabwe’s currency since they entered hyperinflation in 2006, and really have those issues been resolved? No, they did overnight revaluations. They did dated currencies and they’ve been trying many other things to regain that confidence. And that’s the point. Once confidence in currency is lost, it is virtually impossible to get it back until you bring gold into the topic. And we need to be talking about all of the latest things that are going on with Zimbabwe’s currency because it could tell us where we’re headed, coming up.
I’m Lynette Zang, Chief Market Analyst here at ITM rading a full service physical gold silver dealer specializing in custom strategies. And we need one now. Just like I’m sure a lot of people in Zimbabwe wish that they had one going into their hyperinflationary and currency collapse. But let’s, let’s look at what’s happening right now because Zimbabwe acts to support the currency that’s under enormous pressure. Government scraps in import li and they’re doing whatever they can think of traditionally and actually real traditionally, even though the IMF doesn’t want you to think so. So the central bank set to raise interest rates, which they just did on short term loans, is that gonna help? Probably not. The government is committed to winning public confidence in the gold coins and gold backed digital money by ensuring that at all times they remain fully backed by physical gold reserves. Now mind you, you can’t convert the digital gold into the coins, but you can trust the government. Can’t you trust the government? I mean, isn’t that what they’re telling you? Zimbabwe has the world’s highest policy rate at 140% even after cutting the benchmark rate twice this year. Has that stopped the erosion and the currency? No, because this is a con game. Fiat money is a con game. Anytime you can create something from nothing, it’s a con and it requires confidence. And again, when that confidence is lost, it is very, very hard to get back. Almost impossible.
But let’s look at their digital gold back currency. Because it is backed by a certain amount of gold, which helps keep its value stable and it’s tied, the currency is tied to the market value of gold, unlike fiat currency. Well, I don’t really know that. That’s exactly so, but the point is, this currency is tied to the market value of gold, but the market value of gold is also clearly and admittedly manipulated because a rising gold price is an indication of a failing currency. And once you really get that piece, then what you want is the physical. That’s what you want. Zimbabwe gold back digital currency will be used as legal tender and a store of value because they’re trying to stabilize it. And look, this is something that happens a hundred percent of the time when all confidence in the currency is lost, gold becomes part of the new money. So I would say that this is the end of the major manipulation in Zimbabwe because they’re trying to introduce gold into the system. Problem is for the regular people, ideally backing a digital currency with gold involves having a certain measure of gold reserves. Yeah, I mean you have to have a certain amount in order to do it. So the gold backed digital tokens have a best a vesting period of 180 days. So that means that you buy it and you can’t use ’em for 180 days, but they have a prescribed asset status and are acceptable as collateral for loans. Look, no government needs to say this is money. It’s been money for 6,000 years. But this, you know, that they gotta, they’ve gotta say this is legal tender, just like they did with this garbage. They say this is legal tender, so it requires laws.
But let’s move on because Zimbabwe’s digital currency plan needs a hundred million of gold. Okay, well how are they gonna get that gold? Zimbabwe has been struggling to stem the decline and they’ve introduced a policy last year that compels miners to pay part of their royalties in cash and metal. It’s banking on the stash to help it with the latest plan. Now look, I don’t care how they name it, when you coerce somebody into giving you their gold at a certain price, that is confiscation, they just don’t wanna say confiscation because they don’t wanna put that in your head, but arose by any other name. So like other nations, they’ve been compelling miners to give them part of their gold. It’s a concept which is pretty straightforward. We tokenize the gold, we have the gold. Every time we issue a coin, it is backed by real gold. We are still finalizing the details, but most countries are asking us how we came up with that plan. Excuse me, this is the kind of thing that has been tried over and over and over again, even here in the US originally, what the money was backed by a certain amount of the confiscated gold. And then over time, because you’re not physically holding it, it’s easy to take that money away or take that gold backing away until ultimately there’s nothing there anymore. Because once you put gold as a component of the monetary system, it creates restrictions and requires governments to think and be responsible. Do governments really wanna be responsible? No, no, no. They want a tax and they wanna spend and they wanna spend and they wanna spend and they wanna spend, but they are setting the price to lure buyers for the digital gold back money. I think this is so interesting. So they set the minimum price, token price at $10 for individuals and $5,000 for corporates and other entities. So maybe the general public can afford $10, maybe they can’t, a lot of them probably can’t. The tokens will be sold in US dollars and local currency because US dollars have been in use in Zimbabwe for quite some time. You know, I mean even though as we know, the dollar’s losing a lot of value pretty rapidly. But the latter shall be at a 20% margin above the willing buyer willing seller interbank mid rate, which means that if you’re using the locals Zimbabwe dollar, you’re gonna have to pay 20% more. And, and you’ll see why in just a minute. So just bear with me on this. The introduction of digital tokens is the latest attempt by the southern African nation to support its own local currency. They’re trying to do something to get that confidence back. The plan was approved by the monetary policy committee in March, eight months after Zimbabwe introduced gold coins as a store of value to help support the local unit. So, you know, look, gold always plays its part. Make no mistake, gold has been money for 6,000 years and still money.
But of course the IMF does not want Zimbabwe to introduce this IMF cautioned Zimbabwe against plan for gold backed digital currency. And they urge the nation to use conventional ways to address the channels. Well guess what? Nothing is more conventional than 6,000 years of history. This fiat money garbage, this big experiment that’s only been going on for a hundred plus years, that’s actually not, that’s extraordinary measures, that’s not conventional. Gold is conventional. The Washington based lender, the IMF is the Washington based lender, urged authorities in the Southern African nation to rather use conventional measures to address their economic challenges. But they’ve been trying to do that since 2006 and it hasn’t worked. The Zimbabwean dollar has depreciated 40%. Well, this was done on May 9th or this article came out on May 9th. It’s, it’s worse now. We’ll get to that in a minute. But the Zimbabwean dollar has depreciated 40% against the greenback this year to trade at 1.070 on the official market. And between 1,520 300 on the parallel market, meaning the black market. So there’s always gonna be a black market that rises because the official, it’s just like the official inflation rate. Is that real? No, it’s all manipulated and massaged so that it looks like something. And if as long as you the public buys it, they can get away with it. But let me tell you, when the public no longer buys it, then it’s all out the window. That’s why they had to bring in the gold. And this is a long time coming. The IMF last year also raised issue with the Central African Republic’s adoption of Bitcoin as legal tender a decision the nation reversed a year later. And I just thought that was quite interesting that they had done that. Okey doke.
Zimbabwe backs new digital money with 140 kilograms of gold, gold-backed digital money is part of efforts to support the currency. It’s regained that confidence because again, this is a con game. So is this what’s gonna happen to us here in the U.S.? Yes, indeed. Remember over the years we’ve been talking about the destruction of that layers different layers of confidence. In 2008, it was bank to bank confidence as witnessed by the interbank exchange rate. It’s not even in in existence anymore. In 2015 with the Swiss surprise, it was central bank to Central Bank confidence. Central banks discovered, hey, we can’t necessarily trust that a central bank says they’re gonna do something and they actually do it. They will act in their own best interest. And last August it was market to Central Bank. And we’re witnessing that right now in that the central bank, the Federal Reserve says they are not gonna lower rates, they’re not gonna lower rates, they’re not gonna lower rates, and the markets don’t believe them. So that level of confidence, there’s only one level back left. And that’s the public confidence in the currency and in the central bank’s ability to control the inflation. But as you can see, are they really able to do that? I don’t think so.
And then today, Zimbabwe devalues its dollar to try to stabilize the currency. QAnd that’s mostly because the currency sold for 1404 Zimbabwe dollars per US dollar compared to 1,212 a week ago. That extends the decline this year to more than 45% of its value. And of course we know the dollar’s losing a lot of value is witnessed by the inflation, right? But it’s better than Zimbabwe. So I guess that makes some sense on some level and it brings it closer to that parallel market value. In other words, the black market value of about 2300 Zimbabwe one, Zimbabwe dollar two greenback according to ZimPrice price. Okay? The gap between the official and black market has this, this is, this is really why they have the inflation. I mean there’s, it’s never this, right? It’s always something else that indicates why the inflation’s never the choices that politicians on spending and central banks on creating new money. No. That that’s not what causes inflation, right? The gap between the official and black market has distorted pricing that’s helped fuel inflation and prompted a benchmark interest rate of 140% to contain costs. Did it work? No, it didn’t. And so we’re watching global central banks around the world that have been rising rates and buckling and breaking their underlying economies that were set up that way because of all these years of zero interest rate policy and free money printing. I mean, they encouraged all these corporations, all these banks to take on all of these loans and all of this debt. But it’s not this and it’s not the policies that have created the inflation heaven. No, they’re trying to control it. But as we’ve seen in Zimbabwe even raising rates to 140%, it’s not working. And the reason why it’s not working and the reason why it doesn’t work ultimately is because of that lack of confidence. That’s the last little piece that is holding this together, is that people still have confidence. And that’s why you see central banks so bent on getting back to that 2% target. Because at that 2% level, you don’t complain about the inflation. They still get what they want. But the problem is, is there’s virtually officially even no purchasing power left in the currency. And so man, a lot of confidence is required.
So what’s happening here in the US? Texas House Committee passes a bill to create gold and silver back digital currencies. But I like this actually. But on May 2nd, a Texas House committee passed a bill that would create a hundred percent reserve gold and silverback transactional currencies. This legislation, if enacted, would provide an option for individuals to conduct business in sound money, gold, and could create a viable alternative to a central bank digital currency while undermining the Federal Reserve’s monopoly on money. So this is gonna be very interesting to see. And there’s the bill HB4903. It will now move to the calendar’s committee, which determines which bill moved to the house floor for a vote. So it’s not in place just yet, but Texas has a gold vault and they’re filling it. And what I do like about this bill, if it does get enacted, and, and you know, this is not the first time in this country that a bill to have a gold backed currency has been reintroduced. It just never really makes it that far. So let’s see what happens with this one, is that this one would be convertible back into the gold. So unless you can actually convert whatever the money is, whether it’s digital or paper or otherwise into the physical metal, then it’s right for abuse. And we will see a decline in backing over time until you get to the same place again. I mean, that’s just what history shows us over and over and over again.
I came across something really interesting that I wanted to show you. Debt limit default risk is higher than ever. How can you safeguard your wealth? Bitcoin is a more popular safe haven than the US dollar, the Yen or the Swiss Franc as a survey of investors shows. Now, this was the headline. So what would you think? Oh, a lot of people are rushing to Bitcoin in the digital currencies. No, take a look at this. This is the graph. Now what do you have? Here’s bitcoin. Now it is more popular to investors the same as institutional professional investors are in black and retail investors. So that’d be like you and me in blue. And actually Bitcoin is a little more popular with retail investors than the dollar is. Here are those other currencies, they’re all Fiat. Yen, Swiss Franc, and, and there’s something else. They’re treasuries, which is the root of the problem is all of the debt. But hey, that’s even more popular than Bitcoin. That makes a whole lot of sense, doesn’t it? But there’s gold. 51.7% of professional investors and 45.7% of retail investors fly to the true safe haven asset, gold, physical gold, physical silver in your possession because you hold it and you own it outright. And it runs no counterparty risk. This is all counterparty risk. The debt is all counterparty risk. The digital currencies, that’s all counterparty risk as we’ve recently seen with Sam Bankman-Fried and with, you know, FTX and with all of that stuff. If you don’t hold it, you don’t own it. And frankly, it is just that simple. And when you can hold it and own it, why not? For goodness sakes, that is the true safe haven trade. And I find it so interesting that Bitcoin is being promoted in the title when gold is the clear winner because this is conventional. This has been the proven safe haven for 6,000 years and because it is used in every single sector of the global economy, period. End of discussion.
So what do you want to hold going into this? This is what I hold. And frankly, with the big rush of central banks buying gold globally, this is what you should hold too. Who knows more about what they’re doing to these currencies than the central banks? They’re buying gold. So remember, if you haven’t yet, make sure you subscribe. If you like this, please give us a thumbs up, leave a comment, make sure that you watch last week’s videos and stay tuned for exclusive updates on our Thrivers community app. You can sign up at thriverscommunity.com. And lastly, don’t forget to subscribe to our Beyond Gold and Silver Channel where we go through all the pieces of the mantra. Cause you do need more than gold, silver, this is your foundation, but you need food, water, energy, security, barter ability, wealth preservation, community and shelter. ITM Insights and ITM Espanol channels. And if you haven’t already, make sure that you get your own strategy in place. Just click that Calendly link below, have a conversation with one of our gold and silver strategy specialists and get it executed as quickly as possible. We’ve got a lot of deadlines looming. Are they gonna, are they gonna default on the debt? It’s hard to imagine that they would, but I’ll tell you what, I didn’t know that they were gonna let Lehman go out one second before they did it. Anything can happen. Get to safety now because your financial shield is made up of physical gold and silver in your possession. And until next we meet. Please be safe out there. Bye-Bye.
SOURCES:
https://capitol.texas.gov/tlodocs/88R/billtext/html/SB02334I.htm
https://legiscan.com/TX/bill/SB2334/2023
Debt Ceiling Negotiations Have Investors Eyeing Gold If US Defaults – Bloomberg
